On December 15, the SEC filed papers seeking review of Judge Rakoff’s rejection of the $285 million settlement with Citigroup in the Second Circuit. The agency subsequently filed in federal district court a Memorandum of Law in Support of its Motion for Stay Pending Appeal in which it develops the legal argument that is the basis for its appeal – namely, that the district court erred in requiring an adjudication or admission of facts as a condition for the entry of the proposed consent judgment. In addition, the SEC argues, a stay of the proceedings (currently scheduled for a July trial date) is appropriate because otherwise the agency will be required to expend resources on litigating this matter while the appeal is pending instead of pursuing other enforcement activities.

Essentially the SEC’s argument is that Judge Rakoff’s rejection is an outlier. In its brief the SEC states that “[it] is unaware of any court that has ever before required that ‘proven or acknowledged facts’ be established as a condition to the approval of a proposed consent judgment submitted by a federal government agency.” In addition, the relief provided for in the proposed settlement is a reasonable approximation of the relief the agency would likely recover if it prevailed at trial. Finally, the public was adequately informed about Citigroup’s misconduct because of the detailed allegations in its complaint. Accordingly, “the Commission made the reasonable judgment that expending additional resources to attempt to obtain an adjudication of the facts is not justified in light of the adequacy of the relief obtained, the litigation risks associated with trial, and the need to devote those resources to other matters.”

On December 20, Citigroup filed a Memorandum in Support of the SEC’s Motion for a Stay Pending Appeal.